5 Reasons the Petrochemical and Refining Industry is Unprepared for a Crisis
2020 has been a tumultuous year for businesses and individuals all over the world, but the Petrochemical and Refining (PCR) industry has been placed under particular strain.
Not only have facilities and employees been severely impacted by the global COVID-19 pandemic and regional lockdowns in the same ways as everyone else, plummeting oil prices, oversupply, and storage issues have also wreaked havoc for refineries, created issues in industry supply chains, and led to extreme uncertainty in the sector.
Few predicted an emerging crisis of this nature or scale. It’s thrown just about everyone for a loop, exposing just how dangerous and expensive it is to your business if you haven’t prepared properly for a disaster – or if you’ve prepared for the wrong kind of disaster.
We caught up with Rusty Sanner, Category Manager for Daily Maintenance & Risk Management at Aggreko, to find out how you can enhance your contingency plans to ensure you’re steeled against crises like this in the future.
Here are Rusty’s top five reasons that companies, especially those in the PCR sector, were and continue to be unprepared for a crisis of this nature.
1. Your Contingency Plan Was Too Narrow
When creating a backup strategy, most people, quite logically, focus on imminent and likely threats to their business. So if you’re based in California, says Rusty, you might focus on the risks brought about by forest fires. If you’re based in New Orleans, you might think primarily about what you’d do if a hurricane hit.
However, what the COVID-19 pandemic has revealed is how universal threats can become in a globalized world. Something that began in a city in China was able to spread to just about every corner of the world at an astonishing speed because we are all extremely connected.
There are two things to take away from this. Firstly, says Rusty, “you need to think outside the box a little. What other types of threats could impact your business? Beyond weather events? Beyond even a pandemic?”
Don’t just add a few paragraphs into your contingency plan, take this seriously. As Rusty points out, you need to test your plans to make sure that they work and ensure that you actually have the resources at hand to enact them. You don’t want to discover that they don’t work after the crisis hits.
It’s also important to appreciate that it’s not only a virus that has the potential to go global. Other types of disasters that start in one area can also have enormous knock-on impacts further afield. The 2008 financial crash originated in the U.S. but had a profound economic impact on economies the world over. How might a crisis elsewhere impact you further along the line? For example, does your contingency plan cover how you will respond if political upheaval or a natural disaster causes disruption in an oil-producing country you rely on for supply?
2. You Haven’t Included the Right People
Your contingency plan doesn’t apply to just one area of the business. As Rusty puts it, It affects everyone, from the CEO down to housekeeping. You need a clear idea of how a crisis will impact every area of the business – and for that, you need to include people from every part of the business while developing your plan, to ensure you have their perspectives.
A refinery, for example, tends to be made up of many different, connected units and may have a complicated organizational structure. What would happen if a problem started in just one of them? How could this create a ripple of trouble all along the chain? Could a seemingly tiny issue lead to a catastrophic butterfly effect? You need to think very carefully about this.
Sit down with representatives from each unit and discuss their critical business needs. How will you tackle this? How does this spill over into other units? What happens if you can’t send people to your HQ or an affected facility?
It’s also incredibly important that you include key vendors in these planning and review meetings. If your plan requires emergency power, heating, cooling, or other utilities, where will this come from? Engineering studies are a vital part of disaster planning. You need to invite representatives from your temporary utilities partner into those sessions so they know what you need. They can then contribute to your plans and help you design the backup solution.
3. You’ve Underestimated How Critical Some Business Functions Are
Never play down the effect that one disrupted business function will have on the business, says Rusty. Not just the big things, like what happens if your main power source breaks down, but smaller issues you take for granted. For example, what would happen if your HVAC had problems, preventing you from cooling the facility in high summer? Could your staff keep working safely? Would machinery break down? Would you encounter quality control issues?
You need to make sure you’ve recognized what is truly vital and built your plans around it. If something breaks down that you haven’t factored into your plan, it could end up causing absolute chaos.
Rusty points out that this also applies to your logistics and supply chain, which many facilities tend to forget. What happens if a local business you rely on for certain supplies is forced to close abruptly due to a crisis? What happens if one mark is missed in the complex journey of supplies through trains, ships, and trucks? Have you figured out how you will arrange for trucks to continue getting in and out of the facility if the surrounding roads are closed or damaged by an extreme weather event? How you’ll handle shipping at all if your usual vendor is affected? How you’ll recalibrate routes if land borders are closed?
4. You Haven’t Reviewed Your Plans in Years
Things change. Your contingency plan must reflect this. Make sure you review it regularly to make sure it still makes sense, and there are no glaring issues.
Rusty advises that you refresh plans every time your company’s operational and organizational structures alter. You also need to make sure that individuals listed as the first point of call are still working at the facility, that their contact details are up to date, and that the plan reflects current vendor relationships.
Remember that your contingency plan was created specifically for the technology you have in place, the products you use and the processes you have set up. It will be largely useless unless you update it after every upgrade or even a relatively small set of changes and improvements.
Also, if you’ve outlined specific resources, you need to ensure that your plan works, and you need to commit to this. If you can’t commit to them, this isn’t a plan. It’s a wish list. And you need to adapt it to reflect the level of risk and harm to your business you are implicitly accepting by doing so. Just take the UK government, which developed a rock-solid pandemic preparedness plan back in 2003 (and which we know works, because Singapore largely replicated and enacted it in response to COVID-19). The UK effectively defunded this around 10 years ago, put it in a drawer and forgot about it, meaning they didn’t have the necessary resources to hand to roll it out when required earlier this year. Don’t fall into a similar trap in your business.
5. You Haven’t Thought About Your Customers
This is a huge, disastrous omission, and one that so many companies and facilities leave out of their plans. As Rusty says, you absolutely need a “plan for how you will support your customers” as well as tackling in-house problems in the event of a crisis.
For example, let’s say you’re writing a wildfire or flood evacuation protocol into your plan. This is, of course, your primary concern – you need to get your people to safety. However, just thinking about your own team doesn’t go far enough. Without customers, you don’t have a business, so you need to factor in their needs. Who will take responsibility for reaching out to customers to keep them updated in a crisis? Which of your products or services do customers depend on for their own critical operations – and how will you structure your response to prioritize getting these back on track first?
If you shift your thinking to conceptualize your customers as a downstream extension of your core business, it will be easier to imagine how they fit into your plans.
Final Thoughts: You Need a Crack Team
The bottom line is that no facility is an island. Protecting your business means recognizing how interconnected you are to an intricate web of suppliers, vendors, customers, shipping companies, and economies around the world. You can’t predict exactly what will happen or how it will affect you, but you need to keep a very open mind. You also need to make sure that customer and vendor relationships are integral to your plan. Who will manage these in a crisis?
Remember that the vendors you work with know these scenarios inside out. Make use of that expertise. For example, during this pandemic, many refineries have had to strip back to a skeleton crew, stopping throughput and allowing machines to idle. Aggreko has been instrumental in rightsizing utilities, says Rusty, allowing them to switch over from their full-capacity generators and substations in order to keep costs under control.
Depending on the nature of the disaster, you may need a complete backup installation or help to redesign your processes. Why go it alone when you can get the best outside minds on the job?